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Bottom Rung: Companies at Greatest Risk for Default

The Bottom Rung

In an economy plagued by tight credit markets, it is sometimes difficult to determine which companies can cover their debts, and which ones are in serious trouble. In Moody’s “U.S. Bottom Rung” report, the ratings agency lists the 283 speculative-grade, non-financial U.S. companies most at risk of default, up from 157 companies one year ago. Companies on the list have not defaulted, carry either a Probability of Default Rating of Caa1 or lower, a B3 with a negative rating outlook, or a B3 with a
Source: Moody’s Investors Service

In an economy plagued by tight credit markets, it is sometimes difficult to determine which companies can cover their debts, and which ones are in serious trouble. In Moody’s “U.S. Bottom Rung” report, the ratings agency lists the 283 speculative-grade, non-financial U.S. companies most at risk of default, up from 157 companies one year ago. Companies on the list have not defaulted, carry either a Probability of Default Rating of Caa1 or lower, a B3 with a negative rating outlook, or a B3 with a rating under review for a downgrade.

We took a look at the companies on the list with the largest amount of total rated debt, and listed the 15 companies with the worst probability of default ratings, according to Moody’s. However, there are several notable firms in Moody’s report that are outside these 15, and here they are, listed with their probability of default rating (Caa3 is the lowest): Duane Reade, (Private, Caa2), JetBlue Airways (JBLU, Caa2), Dole Food Company (Private, Caa1), Blockbuster, (BBI Caa1), General Motors (Ca), Eastman Kodak (EK, B3), Michaels Stores, (Private, B3), Advanced Micro Devices (AMD, B3), and Arby’s Restaurant Group (Private, B3), among others.

So what are the companies at the greatest risk for default according to Moody’s? Click ahead to find out!

Posted 11 Mar 2009

Level 3 Communications

Probability of Default Rating: Caa1Total Rated Debt Outstanding:  $1.867 billionOutlook: Rating Under ReviewLevel 3 Communications offered this statement: "As we’ve said previously, Moody’s has it wrong in its analysis and understanding of our strong financial position, our core business and our unique growth opportunities. While we disagree with today’s action by Moody’s, we do agree with their prior statements about our solid liquidity position, our ability to repay debt due in 2009 and 2010 w

Probability of Default Rating: Caa1
Total Rated Debt Outstanding:  $1.867 billion
Outlook: Rating Under Review

Level 3 Communications offered this statement:
"As we’ve said previously, Moody’s has it wrong in its analysis and understanding of our strong financial position, our core business and our unique growth opportunities. While we disagree with today’s action by Moody’s, we do agree with their prior statements about our solid liquidity position, our ability to repay debt due in 2009 and 2010 with cash on hand and our 'fundamentally appealing business plan.'"

Source Interlink Companies

Probability of Default Rating: Caa1Total Rated Debt Outstanding:  $1.642 billionOutlook: NegativeCompany could not be reached for comment.

Probability of Default Rating: Caa1
Total Rated Debt Outstanding:  $1.642 billion
Outlook: Negative

Company could not be reached for comment.

Swift Transportation Co.

Probability of Default Rating: Caa1Total Rated Debt Outstanding:  $2.975 billionOutlook: NegativeSwift Transportation did not respond with a comment.
Photo: Daniel Defrancesco

Probability of Default Rating: Caa1
Total Rated Debt Outstanding:  $2.975 billion
Outlook: Negative

Swift Transportation did not respond with a comment.

US Airways Group, Inc.

Probability of Default Rating: Caa1Total Rated Debt Outstanding:  $1.600 billionOutlook: NegativeUS Airways offered this statement via email:”It is our company’s policy to not comment on things like credit ratings or fluctuations in stock price. As we have said previously, US Airways has solidly positioned itself for 2009.  We received a vote of confidence from our investors and business partners last fall when we raised close to $1 billion.  We have reduced capacity so it is in line with expect
Photo: James Willamor

Probability of Default Rating: Caa1
Total Rated Debt Outstanding:  $1.600 billion
Outlook: Negative

US Airways offered this statement via email:

”It is our company’s policy to not comment on things like credit ratings or fluctuations in stock price. As we have said previously, US Airways has solidly positioned itself for 2009.  We received a vote of confidence from our investors and business partners last fall when we raised close to $1 billion.  We have reduced capacity so it is in line with expected demand.  And our industry-leading a la carte business program – where customers pay for what they choose to use like Choice Seats, our blanket and pillow Power-Nap Sack, and checked baggage – is on target to generate between $400 and $500 million this year.  US Airways was America’s number one on-time airline in 2008 among the “Big Six” hub-and-spoke airlines according to the U.S. Department of Transportation’s monthly Air Travel Consumer Report.”

Visteon Corp.

Probability of Default Rating: Caa1Total Rated Debt Outstanding:  $3.206 billionOutlook: NegativeSpokesperson from Visteon Corp declined comment.
Photo: Nicolas Nova

Probability of Default Rating: Caa1
Total Rated Debt Outstanding:  $3.206 billion
Outlook: Negative

Spokesperson from Visteon Corp declined comment.

Georgia Gulf Corp.

Probability of Default Rating: Caa2Total Rated Debt Outstanding:  $1.975 billionOutlook: NegativeCompany could not be reached for comment.
Photo: Daniel Rothamel

Probability of Default Rating: Caa2
Total Rated Debt Outstanding:  $1.975 billion
Outlook: Negative

Company could not be reached for comment.

Lear Corp.

Probability of Default Rating: Caa2Total Rated Debt Outstanding: $2.304 billion Outlook: Rating Under ReviewCompany could not be reached for comment.Correction:
Photo: AP

Probability of Default Rating: Caa2
Total Rated Debt Outstanding: $2.304 billion
Outlook: Rating Under Review

Company could not be reached for comment.

Correction: This slide previously contained an incorrect image.  We regret the error.

R.H. Donnelley Corp.

Probability of Default Rating: Caa2 Total Rated Debt Outstanding:  $3.483 billionOutlook: NegativeSpokesperson from R.H. Donnelley declined to comment.
Photo: AP

Probability of Default Rating: Caa2
Total Rated Debt Outstanding:  $3.483 billion
Outlook: Negative

Spokesperson from R.H. Donnelley declined to comment.

Rite Aid Corp.

Probability of Default Rating: Caa2 Total Rated Debt Outstanding:  $6.806 billionOutlook: NegativeCompany could not be reached for comment.
Photo: AP

Probability of Default Rating: Caa2
Total Rated Debt Outstanding:  $6.806 billion
Outlook: Negative

Company could not be reached for comment.

Citadel Broadcasting Corp.

Probability of Default Rating: Caa3  Total Rated Debt Outstanding:  $2.285Outlook: NegativeCitadel Broadcasting representative declined comment, stating that they do not talk to the press.
Photo: AP

Probability of Default Rating: Caa3 
Total Rated Debt Outstanding:  $2.285
Outlook: Negative

Citadel Broadcasting representative declined comment, stating that they do not talk to the press.

Claire’s Stores, Inc

Probability of Default Rating: Caa3Total Rated Debt Outstanding:  $2.585Outlook: NegativeCompany could not be reached for comment.
Photo: Imnop88a

Probability of Default Rating: Caa3
Total Rated Debt Outstanding:  $2.585
Outlook: Negative

Company could not be reached for comment.

Ford Motor Company

Probability of Default Rating: Caa3Total Rated Debt Outstanding:  $31.552 billionOutlook: NegativeCompany could not be reached for comment.
Photo: AP

Probability of Default Rating: Caa3
Total Rated Debt Outstanding:  $31.552 billion
Outlook: Negative

Company could not be reached for comment.

Idearc, Inc.

Probability of Default Rating:  Caa3Total Rated Debt Outstanding:  $9.294 billionOutlook: NegativeCompany could not be reached for comment.
Photo: AP

Probability of Default Rating:  Caa3
Total Rated Debt Outstanding:  $9.294 billion
Outlook: Negative

Company could not be reached for comment.

Readers Digest Association

Probability of Default Rating: Caa3Total Rated Debt Outstanding:  $2.210 billionOutlook: NegativeCompany could not be reached for comment.
Photo: Ian MacKenzie

Probability of Default Rating: Caa3
Total Rated Debt Outstanding:  $2.210 billion
Outlook: Negative

Company could not be reached for comment.

Realogy Corp.

Probability of Default Rating: Caa3Total Rated Debt Outstanding: $7.563 billionOutlook: NegativeRealogy declined to comment.
Photo: AP

Probability of Default Rating: Caa3
Total Rated Debt Outstanding: $7.563 billion
Outlook: Negative

Realogy declined to comment.

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